Is it time for a rethink on the definition of aid?

May 2, 2013

     By Duncan Green     

Crushed by my humiliation at the hands of Claire Melamed, it would just make matters worse to come back for another round of post-2015 jousting, so let’s move on.

I actually quite like blogging about meetings held under Chatham House rules, as they allow me to write about the discussion without worrying about who said what. And to take the credit for anything clever, of course.

So last week, I found myself in a heated debate on the future of aid, with a bunch of NGOs and aid boffins. The topic was ‘is it time for a re-think?’ Why? Because the aid world is changing:

–          New donors, such as foundations, philanthropists and emerging economies such as China and India are starting their own aid programmes, oftenChina-aid-Cambodian-flood-007 outside the traditional donor club of the OECD DAC

–          Increasing diversity of sources of ‘financing for development’, from domestic taxation to remittances to private investment

–          Austerity driving many traditional donors to cut aid, either overtly or sneakily, by trying to count lots of non-aid flows as aid, or both (see FT letter here). A reminder that in terms of its increasing aid budget, the UK is really an outlier these days – ‘we are talking in the vicarage, here’.

–          The post-2015 discussions raising lots of questions about sustainable development goals and collective action on everything from climate change to tax havens, which have been traditionally fenced off from the aid discussion.

Underlying all this was a sense that the definition of aid corresponds to an old order (rich northern countries give cash for big push in the South to get public services functioning and the economy humming). That world has little to do with many of the preoccupations of modern development – fragile states and conflict, climate change, leaky financial systems, migration etc etc.

But does that mean aid needs to be overhauled? All were agreed that the current levels of aid, running globally at around $130bn a year, are a precious achievement, the only flow of resources aimed specifically at helping poor people, with a reasonably tight definition, making it easier to defend from dilution. Lots of talk of not throwing babies out with bathwater. (And tanks on lawns, heads in sand – mixed metaphors threatened to get seriously out of control.)

Which brought us to the political context – the march of the Austerians means that any decision to open up discussions on the definition of aid (which governments such as Netherlands and Germany are already doing) is much more likely to lead to a watering down/dilution of aid, with lots of other stuff being included – I pointed out that, in contrast to Pandora’s Box, the nasties will fly in when this one is opened.

Broadly, aid donors will want ‘what allows you to reach your aid target without spending any more money’, while aid recipients will want to keep everything separate, so additional cash for things like climate finance is not counted as aid. One old hand said ‘and the donors will win.’

Which made me line up on the ‘conservative’ side of the table – the risks are largely downside, so try and resist efforts to redefine aid and defend what you’ve got. Others felt that the debate was already happening, and we had no option but to engage.

Everyone was for improved data and transparency (who isn’t?) on non-aid flows, so that donors, governments and others could see what is already happening before allocating their cash (lots of praise for the new DFI/Oxfam Government Spending Watch database of how much poor countries are spending on the MDGs, with seasoned aid officials saying they had spent years trying to get this data out, without success). Another piece of good news is that Development Initiatives are working on an annual report on Investments to End Poverty, which documents all resources available for poverty eradication – watch out for it in September and see some of the material here.

you sure about this?

you sure about this?

Lots of discussion on the 0.7 target, with the technocrats seeing it as arbitrary and weird, and the advocates seeing its use in driving government action, even in countries that haven’t endorsed it, like the US. Interesting suggestions that 1% of government spending (a penny in the pound) might make a more sensible and communicable target than 0.7% of Gross National Income.

As for the new southern aid donors, the wonks reckoned that they are not interested in targets, but are interested in what counts as aid – one cited Turkey which, when obliged to count it, found it was giving much more aid than it had realised, partly because it had assumed a narrower.

Other interesting discussions on ‘fair shares’ – how you could modify the 0.7 target to take account of a country’s stage of development, perhaps using the UN formula for assessing members’ contributions to its budget. Anyone done that?

Overall, I did feel that there is an institutional problem here – at some point the aid discussion needs to be taken out of the OECD, even though it’s been doing a pretty good job so far. Otherwise, it risks being seen as a project of the declining North, with minimal buy in from others. But would the UN (the obvious alternative) do a better job?

My conclusion? At this political moment, I think there is a real danger in trying to stretch the debate on aid to include everything that contributes to development (we wonks always like to do this – look at post-2015). Right now the test of any proposal should be ‘what is most likely to increase rather than reduce funds going from rich countries to poor countries for good purposes?’ For example, stretching ‘aid’ to include most peacekeeping fails that test badly  –   irrespective of all the good sense about security and development reinforcing each other. Better to try and keep the aid definition (and debates) tight and work on the rest in other fora – Government Spending Watch, tax havens, climate change etc. We won’t win them all – for example there is clearly substantial overlap between climate finance and aid, so insisting on ‘additionality’ is very unlikely to succeed, but I see little benefit in helping others prize open the Pandora’s Box of aid.

May 2, 2013
Duncan Green